Posted by: Josh Lehner | April 25, 2017

Oregon’s Slower Growth Outlook

The May forecast is fast-approaching. It is the single most important thing our office does, as it effectively sets the revenue estimates and kicker baseline for the upcoming biennium. This week and next we are meeting with our economic and revenue advisors to discuss the outlook and pick their brain for insights into their industries, what their clients are seeing, and the like. Right now, however, I wanted to review where the economic outlook stands today. This may change somewhat after our advisory meetings and as we finalize the May forecast.

Overall, our office is expecting slower economic (and revenue) growth moving forward than what we have seen in recent years. This largely stems from the fact that the economy is currently somewhere near full employment. The unemployment rate is at historic lows. Even if you add back in all of those who probably should be in the labor force but are not looking for a job today, the labor market is tight. Those working part-time but want full-time work is also back down to pre-Great Recession rates. And importantly, the share of the prime working-age population with a job is also back to where it was in 2007, more on this soon.

As such, job growth in the past year has slowed. We are past the cyclical peak seen a couple years ago when the state was adding 5,000 jobs per month and seeing growth rates of 3-3.5% year-over-year. Right now, we are seeing gains of closer to 3,000 jobs per month, or rates of 2-2.5% year-over-year. This is largely in-line with our office’s forecasts and what Oregon needs to keep pace with the growing population. Remember, an economy approaching full employment behaves and grows differently than one digging out from a recession. This relative slowing in job growth is essentially across the board. It is not just one or two industries weighing on the topline. Two-thirds of employment subsectors are seeing slowing growth.

Given tax revenues largely track the economy, expectations for slower job growth translate into slower revenue growth as well. I think this point gets lost in the current budget discussion at times. Of course it is not lost on legislators and budget writers who ask us about this. However, this relative slowing amounts to hundreds of millions of dollars. Depending upon how one extrapolates recent trends, the projected budget hole would be 20 to 40 percent smaller if growth in 2017-19 matched what we have seen in 2015-17.

Now, since 2012 our office has built in this economic and revenue slowdown starting in about 2016. At this point in the business cycle, and with the economy near full employment, it is hard to forecast growth rates to re-accelerate and match those seen a couple of years ago. Importantly, these forecasts have also largely tracked well. That said, they have not been perfect. We had a relatively small kicker in 2013-15, but a kicker nonetheless. We are certainly not yet out of the woods on any potential kicker in 2015-17 either. As such it is important for us to gather input from our advisors as we work to hone our estimates for the upcoming biennium and release the official forecast on May 16th.

Posted by: Josh Lehner | April 18, 2017

2017 Tax Season

Happy tax day everyone! *ducks* Right now, our friends over at the Department of Revenue are buried in pixels and a few paper returns. As FiveThirtyEight’s Ben Casselman showed yesterday, there is a bulge of tax filing activity right at or near the deadline. It takes a week or two to process all of these returns.

That said, what really matters for revenues are the size of payments (or refunds) attached to each of those returns. While there is a steady stream of filers in recent months, the bulk of the payments are still outstanding, or at least have yet to be processed. The former matters quite a bit for DOR workloads, but the latter matters for tax revenues and our office’s forecasts.

At this point we typically have about three-quarters of all refunds issued, but less than half of the payments received. We will know more here in a couple of weeks. Our office’s next forecast is scheduled for May 16th and this is the big one, it sets the baseline for the upcoming budget and any potential kicker calculations*.

* Officially, the kicker calculation is based on what is called the Close of Session forecast. The COS is our office’s May forecast plus any legislative changes made between that outlook and sine die, or when the legislature adjourns.

Posted by: Josh Lehner | April 12, 2017

Causes of the Great Housing Shortage

The housing recovery is still incomplete. Even in the nation’s fast-growing metro areas, new construction is not keeping pace with demand. The lack of supply has created a housing shortage and is well known at this point. What is less discussed are the reasons why we have under-built housing. Given high rents and home prices, why haven’t we seen a stronger supply response to chase those profits? Our office has dug into 5 of the most commonly cited reasons. Our summary is below. A major H/T and thank you to the National Association of Home Builders (NAHB) economic team for their work on many of these issues.

Supply Constraint #1: Confidence

Anecdotal reports and conversations suggest spec development is down. It is possible that builders and developers have lost some of their appetite for risk. If they wait to build until a contract is signed, or close to it, supply will continue to lag demand. However, as Mark said at City Club of Portland, a successful developer by their nature is optimistic. The NAHB Wells Fargo home builder sentiment index is all the way back to previous peaks. As such, it is unlikely that the lack of builder confidence is what is really holding back the market.

Supply Constraint #2: Labor

For years now, a common refrain has been that it is hard to find construction workers and that wages are really high. NAHB reports there is a shortage for a number of occupations. I remember hearing about these shortages back in 2013 and 2014, which, at the time, was a bit hard to believe. Not that it wasn’t true, just that there was clearly slack, and available workers, in the economy. Now? I certainly believe it is hard to find workers, for any industry. The labor market is tight. That said, average wages in the construction industry are well within their historical range, when compared with other Oregon workers. Again, this does not mean there are not labor issues in the construction industry, and there can certainly be skill-specific shortages. But in general, what the industry is experiencing is felt across a wide range of sectors.

Even so, we are hearing that labor costs and bids are really high today. So if it is not showing up in workers’ paychecks, that means it might be showing up as firm profits. Some of this increase could be due to market power and industry consolidation after the crash. Furthermore, we are reminded by our advisors, that even as firm profits are rising again, this is cyclical. These are the same companies that lost their shirts during the crash, and will likely do so again next cycle.

Supply Constraint #3: Land Use

In our office’s presentations around the state, the first reason or theory everyone cites is our state’s unique land use laws. Specifically the urban growth boundary restricts buildable land, thus raising prices and eroding affordability. Our office’s view is that policy matters. When comparing, say, Portland home prices to other large metros, we stand out as being more expensive than most, particularly compared with those of similar incomes. Some of this is likely the long-run effect of our policies. This, of course, leaves to the side any discussion of the reasons why such policies are there in the first place.

That said, our land use laws are not the likely driver behind the low supply and eroding affordability in the past 5 years. The vacancy rate in the Boise MSA is right there with Portland’s and among the lowest in the nation. I have never heard anyone talk about Idaho’s land use laws. Given the underbuilding of housing is not an Oregon-specific issue, using Oregon-specific explanations does not get you very far. UPDATE: Just to clarify. I do think land use laws impact overall prices here in Oregon. I just do not think they are a primary contributor to what has taken place in the past 5 years. Again, the fundamental housing problem is not Oregon-specific.

Supply Constraint #4: Lots

The lack of shovel-ready, or buildable lots is clearly a constraint on the housing market today. Builders nationwide are reporting shortages at an increasing rate. The issue is worse in the West, and in prime locations — so-called A lots — but is still a major and growing concern throughout. Locally, the issue is largely the same, although Oregon’s land use laws can come into play. It is not necessarily the total amount of zoned land — there is supposed to be a 20 year land supply within the UGB. In conversations, what builders really care about is the effective land supply — or the amount you can actually build on in relatively short order. Reasonable people can and do disagree about the assumptions in the former, but clearly the latter is a problem here in Oregon, and across the country.

Overall, the lack of buildable lots results in higher prices and fewer units. However, as Dave Crowe, NAHB’s former chief economist, wrote in 2014 and in 2015, the lack of land is due to tight financing. This means that lot supply, while a major constraint, is still more a symptom than a cause of the eroding affordability and meager supply.

Supply Constraint #5: Financing

The housing bubble and Great Recession was a traumatic experience. In its wake, banks tightened their lending standards — both to developers and home buyers. Some of this was clearly needed and welcomed. However, how tight is too tight?

Earlier this decade, banks loosened standards and increased loans for multifamily projects. The result has been a surge in apartments. This increase in supply is now impacting rents. Concerns of overbuilding apartments and with the economy at or near Peak Renter, banks are tightening multifamily standards again.

However, the Fed’s Senior Loan Officer Survey also shows banks tightening standards for construction and land development loans. Given the lack of buildable lots, this is a big concern. Now is not the time to be pulling back on land development. Luckily, this may not be happening across the board. It certainly is happening for multifamily land development, but NAHB has their own survey of their members’ finances. It is an industry publication with a smaller sample size, so the results should be taken with a grain of salt. That said, NAHB members are reporting that banks are still loosening standards in recent years.

At some point, the proof is in the pudding. Loan volumes to builders are growing again, however remain considerably lower than last decade. Below is my replication of a chart current NAHB chief economist Robert Dietz has been using for years. As he notes, these are stocks and not flows. As such we cannot get a perfect look at the increasing flow of credit, but can see it is clearly happening.

Finance and credit availability is a macro lever that can better explain national patterns than any localized issue can. When it comes to housing market confidence, particularly after the bust, it makes some sense that banks and their regulators are more likely to be once bitten, twice shy. In conversation, banks and credit unions are citing some restrictions on their lending activity and issues with making sure their loan portfolios are balanced. I do not know nearly enough about the inner workings of Dodd-Frank to render judgement, but these topics are part of the discussions we have.

Overall credit availability is a good news – bad news story. The bad news is that builder lending volume is considerably smaller today. It takes a lot of time, effort and money to take a piece of dirt, get entitlements, put in roads, utilities, and the like. The dearth of this activity during the bust, for some understandable reasons, has put a wrench in the development process of bringing new supply to the market.

The good news is that the volume of lending has been increasing at double digit rates for the past three years. The flow of credit has returned. Our office’s main housing advisor has been saying that we can expect to have a single family building cycle, that is has just been delayed a long time. He has been two steps ahead at every point in the housing market and appears to be right about this too.

Overall, I am now more of an optimist than in recent years. The apartment surge is beginning to hold down rents and single family construction continues to increase. We are at or near the housing inflection point. Due to stronger household income gains, affordability has largely stopped getting worse. A larger share of households can afford these higher rents and home prices in an improving economy. Between now and the next recession, affordability is likely to get somewhat better. Even so, as our work on the Housing Trilemma shows, regions face trade-offs between affordability, economic strength and quality of life. That said, stronger supply does help with broad regional affordability. The key is continuing to build enough housing to keep up with demand.

Posted by: Josh Lehner | April 6, 2017

Job Polarization in Oregon, 2016 Update

Last week we took a look at the newly released occupational data and job polarization across the U.S. Today is a relatively quick graphical update for Oregon and some of our regions across the state. At this point I don’t think there is a whole lot more to add in terms of the narrative. Please see last week’s post and our previous report for a more complete look. As such, I’ll get straight to the charts.

The relative pattern of job growth being concentrated among both low- and high-wage occupations continued in 2016. Middle-wage jobs are growing again, but to date they are only about half-way back to where they were prior to the Great Recession.

While middle-wage job growth slowed nationwide in 2016, that was not the case in Oregon where growth picked up slightly, which is encouraging. Overall Oregon’s job growth outpaces the typical state, as we always do in expansion, but we are seeing this across all three wage categories.


Since our original report, there have been a few slight tweaks to the methodology we use. We are always looking to improve. It does not change the fundamental trends or outcomes, however we are working to refine our analysis. Below you can see each individual occupational group, how we classify it into the wage categories and its growth in recent years. You will notice that the occupational groups seeing the largest employment declines, and slower recoveries, are dominated by the various middle-wage jobs. You can also see why we talk about how polarization impacts both men and women here in Oregon.

Our office generally sticks to the trends based on wages. It’s an easy and digestible way to discuss the data. However what is really driving the underlying trends, and where the academic literature comes in, is based on the types of tasks and duties performed by these different occupations. As we write in our report:

Technological investments often involve the automation of what may be termed routine work, allowing each individual worker to be more productive and allowing firms to get by with fewer workers. […] routine jobs have sufficiently well-defined tasks that can be satisfactorily completed by a computer program. […] examples include bookkeeping, clerical work and repetitive production tasks (manufacturing). […] use of modern software allows each bookkeeper to serve more clients than in the past. Similarly, for occupations where globalization is a contributing factor, routine jobs can be performed abroad by workers who are willing to accept lower wages and who possibly have less education or less experience.

Relative to routine occupations, jobs that require abstract thinking and decision making and/or in-person interactions and communications are more difficult to replace. For example, the face-to-face interaction required for lower wage consumer service occupations (e.g. hairdressers, and childcare workers) make automation or offshoring of these services nearly impossible with current technology. Also, occupations that require specialized capital stocks or access to natural resources face less pressure than do routine occupations.

Lastly, we know the impact of polarization is not uniform across the state. Some areas are seeing stronger growth then others. High-wage job growth is strongest in our urban areas. That said, even in our rural areas the relative pattern of job growth fits the polarization story. Rural high-wage jobs are leading the recovery for rural Oregon even if rural Oregon’s overall recovery has trailed urban Oregon.

Posted by: Josh Lehner | March 31, 2017

Job Polarization, 2016 Update

Job polarization, where the majority of the job gains are concentrated in both the low- and high-wage categories, is best seen in the occupational data. The U.S. Bureau of Labor Statistics releases occupational data once a year, as opposed to industry data every month. The 2016 occupational data was released today, March 31st. What follows is a brief update on polarization in the U.S. Next week I will dive into the state level data. See our office’s 2013 report for a more thorough and complete look.

Overall, the same job polarization trends we have seen this century continued in 2016. Job growth was strongest among low- and high-wage occupations. The good news is that middle-wage jobs are also growing, however they took a step back in growth in 2016. This slowdown is concentrated among the traditional blue-collar occupations. Installation, Maintenance and Repair jobs, and Transportation jobs saw slower growth. Construction did too which is interesting given the ongoing (slow) housing recovery. Production jobs — essentially the manufacturing jobs that do the manufacturing — saw very little growth. Some of this is to be expected given the fallout of the oil crash to end 2014 and the strong U.S. dollar.

The second chart shows the actual change in employment by wage group since the start of the Great Recession. The biggest problem with job polarization is that middle-wage jobs decline the most in recession and don’t come back all the way in expansion, particularly as a share of the economy. Job opportunities for middle-wage jobs is a declining share over time, particularly since the turn of the century. That said, middle-wage jobs themselves don’t decline forever. As the Federal Reserve Bank of New York noted last year, the actual number of jobs created were strongest among middle-wage occupations in recent years. This is good news, even as growth rates remain lower for such jobs.

When it comes to middle-wage jobs there are a few important things to keep in mind. First, they impact both men and women, particularly those without college degrees. While many of us know the story of the manufacturing decline hurting men without college degrees, the same thing is true for women and administrative and office support occupations. In fact, here in Oregon the relative decline of office support jobs for women and production jobs for men have been equal in recent decades.

Second, the outlook varies depending upon which middle-wage job you are looking at. Some middle-wage jobs are driven by population gains. The more people you have the larger the demand for artists, clergy, construction workers, police officers, plumbers, teachers, and the like. Locations with stronger population gains have seen better growth in these types of middle-wage jobs. The other types of middle-wage jobs can broadly be considered business support occupations. From our report:

Administrative Support, [some] Sales and Transportation all act as suppliers of labor and services to other businesses or employees. With increases in business operations, including headquarters, the demand for such occupations will increase even if technological advancements continue to eliminate a portion of these jobs. This provides an opportunity for continued investment into activities that foster both an entrepreneurial business climate and also recruitment and retention efforts of existing firms. The loss of significant headquarter operations in Oregon over recent decades has decreased the demand for some of these business support firms and workers.

Finally, if you want to slice the data differently, you can look at changes between manual and cognitive, and routine and non-routine jobs

In the short-term, middle-wage jobs are expected to continue to grow along with the economy. Some cyclical rebound is still likely/needed for both construction workers and teachers in particular. However, over the longer term, the relative share of jobs is expected to continue to decline as high- and low-wage jobs see stronger growth.

I will have a lot more on job polarization here in Oregon next week and plan on diving into other states in the near future, including an update on other measures like state level Total Employment Gaps.

Posted by: Josh Lehner | March 28, 2017

Housing Recovery Still Incomplete

Our office has done a lot of housing work in recent years — things like The Housing Trilemma, Peak Renter, Rural Affordability and The Housing Inflection Point — but haven’t published much of the basic nuts and bolts numbers. What follows is a handful of updated charts that show the still incomplete housing recovery.

First, permits for new construction continue to increase, albeit slowly. Multifamily permits rebounded first and seem to be holding steady at a relatively high level — somewhat larger than the mid-2000s but not quite as strong as the construction booms in the late 1980s and late 1990s. Single family permits have lagged and are just now about halfway back to 1990s level of construction, let alone peak bubble rates.

Given the nature of the Great Recession — a housing bubble and financial crisis — it wasn’t a huge surprise to see housing lag the recovery, even if it used to be the first thing to bounce back. However in recent years the lack of construction has become a big issue in terms of eroding affordability, which is a national and a statewide problem.

Of course it’s not just that the total number of housing starts is relatively low that’s an issue. The problem is that the level of new construction in the past decade has been considerably less than what is needed to keep pace with a growing population. It’s the lack of supply relative to the growing demand that underlies the affordability challenges. The housing bust has clearly been disproportionate to the boom. The fact we were/are underbuilding was apparent all the way back in 2011. While our office had a more subdued housing outlook than many national forecasters, we still expected starts to increase faster than they have to meet the the actual need and demand in the economy.

Note: While our office’s chart below tracks the Portland region, everywhere else in the state I have looked, the pattern is essentially the same.

In terms of the outlook, our office still expects housing starts to increase a bit further. As we write in our forecast document:

Over the extended horizon, starts are expected to average a little more than 23,000 per year to meet demand for a larger population and also, partially, to catch-up for the underbuilding that has occurred in recent years. As of today, new home construction in cumulatively about one year behind the stable growth levels of prior decades even after accounting for the overbuilding during the boom.

Just as construction activity has yet to recover, construction and related employment remains about 15 percent below pre-Great Recession levels [1].

Such jobs have been growing at an above average pace in recent years, however there remains considerable room left to go in order to return to something approaching historical norms. It should also be noted that housing (and government) jobs represent a larger share of local employment in the state’s secondary metros and rural areas. As the housing market has returned to growth, it has boosted local economies in recent years. This was missing throughout the early stages of recovery in much of the state.

One other interesting trend has been the shift in the number of construction workers per housing start. This ratio remains higher than has historically been the case. Now, I don’t think it means there are literally more individuals working on each home. Rather it is a crude ratio. The shift likely reflects a few different trends, including more multifamily, but also increased remodeling activity which requires workers (and permits) but does not result in a newly build home.

Overall these trends seen in the data are not unique to Oregon. The national data show the same issues. That is both encouraging and discouraging at the same time. On the positive side, it means that local problems are not the main driver behind the housing market issues today. On the bad side, it means there is something impacting the entire national housing market that is driving these results which makes it harder to fix locally. Our office has dug into a number of the supply side constraints in recent months and will summarize that work in the near future. Update: Here is our summary of the main supply constraints.


[1] A big thanks to Lauren Cummings and our friends at the Employment Department for helping with the data used here for Construction and Related Employment. Based on BLS research, the following industries are included: Construction, Wood Products Mfg, Cement and Concrete Product Mfg, Architectural and Structural Metals Mfg, Construction Machinery Mfg, Lumber and Construction Supply Wholesalers, Hardware and Plumbing Wholesalers, Furniture Stores, Building Material and Garden Supply Stores, Real Estate Credit, Mortgage Loan Brokers, Office of Real Estate Agents, and Activities Related to Real Estate. See here for more.

Posted by: Josh Lehner | March 21, 2017

Effective Vice Tax Rates, Marijuana vs Tobacco

There are different ways to design and apply a tax. Depending upon the exact tax structure, this can result in similar or different effective tax rates across a range of products or activities. At the request of Senator Boquist, our office recently looked into the effective tax rates here in Oregon on recreational marijuana and tobacco products. We presented the following information to the Senate Finance and Revenue Committee and the House Committee on Revenue, however it did not make it into our quarterly publication.

Right now Oregon taxes marijuana at a fixed percentage of the sales price (17% for the state, with a local option of up to an additional 3%). This type of tax is usually referred to as ad valorem, meaning the tax increases in proportion to the price. Given the way ad valorem taxes are applied, it means the effective tax rate is equal to the statutory tax rate. Additionally, as I said at the forecast release, and a quote that made it to Twitter, a benefit to this type of tax is that it applies equally to both higher-end and lower-end products.

Even as Oregon does not have a general sales tax, we’re all familiar with this type of tax. What it means is that recreational marijuana customers will pay about $1.50 in state taxes per gram based on average sale prices as reported by the Department of Revenue.

On the other hand, tobacco products are usually taxed based on a fixed amount per product, or what can be called a specific excise tax.

In the case of cigarettes, the federal government levies a $1.01 tax per pack, while Oregon adds an additional $1.32 per pack. Since these taxes are fixed, it means the effective tax rate per pack depends upon which product a consumer buys. In doing some admittedly unscientific research on what cigarettes cost today, I went into three convenience stores/gas stations in the Portland and Salem area. What follows is a stylized example based on this window shopping. Average prices across the state based on what customers actually purchase will differ, but will generally fall within the ranges discussed below.

Name brand cigarettes like Camel and Marlboro seemed to cost about $6.50-$7.00 per pack. This means the effective tax rate on name brand cigarettes is around 50% (taxes paid as a share of the pre-tax price, or taxes paid as a share of the price excluding taxes). For generic brands, the purchase price per pack is considerably lower, less than $4.50 per pack. However given that the taxes per pack remain the same regardless of brand or price, that means the effective tax per pack skyrockets up to more than 100% in many cases.

A similar pattern can be seen when it comes to moist snuff, although effective tax rates appear to be somewhat lower than for cigarettes.


Even as taxes can be applied in different ways, they can also be calibrated to result in similar effective tax rates if desired. That said, one of the goals of M91 that legalized recreational marijuana was to keep taxes low to encourage conversion from the black market into the legal market. There are lots of policy goals and ideals when it comes to taxation beyond strictly talking about effective tax rates.

Finally, for comparison purposes we showed how large each revenue source is for the state. At roughly $60 million in tax revenue, marijuana and other tobacco products (mostly moist snuff but also cigars and loose tobacco) are considerably smaller than cigarette tax revenue at more than $200 million per year. mjtobrev16

In terms of where these revenues go, and which programs they are spent on, it really varies by product. For example, none of the marijuana revenue goes to the General Fund, which is a common misconception. For a full breakdown of where these monies are dedicated, see Table B.6 in Appendix B (PDF) of our forecast document.

Posted by: Josh Lehner | March 15, 2017

Oregon Traffic, A VMT Update

As everyone who has driven a vehicle recently knows, traffic volumes are up and congestion is worse today than just a couple years ago. I know I see and feel it driving around the state for presentations over the past year. While the increases have been particularly strong here in the Willamette Valley, it has a statewide impact. One reason is that goods produced and shipped from around the state generally travel to the Valley and through Portland on their way to their final destination. So even if traffic and congestion may not be quite as bad elsewhere in the state, it still impacts the regional economy.

To put some numbers to the increased traffic volumes, total vehicle miles traveled across the state has increased about 10 percent in recent years. This increase followed a decade where total traffic volumes were flat or declining.

So what’s going on? The latest Oregon Department of Transportation revenue forecast(PDF) says it all:

With jobs plentiful and fuel prices low people are driving again and as Oregon attracts more people from other states this leads to additional fuel consumption and DMV transaction volumes.

In the past year or so, Dan Porter has been promoted to the head forecasting position over at ODOT. He’s been doing some really great work and his revamped forecast document is full of interesting nuggets of information. Our office loves ODOT data because it’s somewhat economic in nature, it is impacted by longer-run demographics and shifts in consumer demand. Dan’s work also feeds into some of the Highway Cost Allocation Study which our office oversees each biennium. If interested in learning more about the different trends impacting the state’s overall transportation system — from weight mile taxes to DMV work loads — I highly suggest you read the forecast.

One aspect of traffic that has really changed over the past 15 years or so is driving behavior. Even as the state’s population continues to increase, for much of that time period total traffic volumes were flat. On an individual basis we were and are driving considerably less than we were historically. Based on the data, it’s clear that prices matter. As gas prices increased during the mid-2000s, driving behavior shifted down and remained low throughout the Great Recession and its aftermath. However now that prices are low again — and they’re up y/y today but still low relative to the past 10 years — driving has made a rebound. That said, VMT per adult remains considerably lower today than last decade even with the rebound in recent years. For more on VMT trends, see our office’s previous work.

What’s really interesting is trying to figure out what are driving these behavioral changes. Some is economic — household incomes, gas prices, etc — some is due to things like urban form, but some is societal and even generational. One key trend has been that fewer and fewer teenagers were getting their licenses and driving relative to previous generations. To what extent are these trends expected to continue, and how much of this shift is a life-cycle vs generational change? There are a number of national studies that dive into this. The general consensus expects most of these shifts to be, more or less, permanent. We know teenagers today don’t go cruising around town like they used it. They’re much more plugged into online activities (gaming, social media, etc) which doesn’t require actually driving from place to place. That said, some of it clearly is cyclical. In fact here in Oregon we’re seeing the number of teenagers getting a license increase again. Here is Dan’s chart from the forecast document. As Dan annotates, policy changes clearly impact these figures over time, but the numbers are still picking up.

Like I mentioned, our office finds the ODOT data fascinating. In the future I plan on borrowing and highlighting some more of Dan’s work, along with some of the research that goes into the Highway Cost Allocation Study. In the meantime, I would direct you to a couple of informative posts over at City Observatory. The first discusses the fact that with the increase in driving, we’re also seeing an increase in traffic deaths — unfortunately the two go hand in hand. The second digs into the methodology underlying some of the congestion “studies” you may see pop up in the news from time to time.

Posted by: Josh Lehner | March 10, 2017

Oregon Metro Size and Employment, 2016

Yesterday we looked at job growth across the U.S. based on metro size, including rural areas. Today we’ll take a similar look at growth here in Oregon. Overall we know our economy is more volatile than the typical state. We fall further in recession but grow faster in expansion. Given the economy spends many more years in expansion than recession we tend to come out ahead over the entire business cycle. The two main reasons for this volatility are our state’s industrial structure and our migration flows. The Great Recession is shaping up to be no different, even if it was clearly much more severe overall. Each of our areas here in Oregon — from our largest metro in Portland to our secondary metros to our rural areas — saw larger job losses than their counterparts across the country. However now that we’re coming up on the expansions’ 8th birthday, Oregon is starting to pull ahead across the board.

Relative job growth patterns here in Oregon are both similar to the U.S. overall and different. We’re similar when it comes to the largest metropolitan areas. Portland, like the nation’s other big metros, popped up first in recovery. For the last 6 years Portland has been adding jobs at a 2-3% annual rate, which outpaces the typical large metro by about 0.5 – 1 percentage points.

Where Oregon differs is in the growth of our secondary metros and rural areas. While it took a few additional years for Oregon’s secondary metros to see the expansion, they have really come online in the past 3 years. They’re now adding jobs at a faster rate than Portland is, and considerably faster than their national counterparts — 3-4% here in Oregon vs 1-2% nationwide in recent years. Much of this has to due with the nature of the business cycle. Bend and Medford were among the absolute hardest hit housing bust metros in the entire country. It took considerable amount of time to recover and reorient following the busts they experienced. But the strong growth isn’t limited to Bend and Medford either. In recent years Albany and Salem are growing faster than they have in decades and Eugene is seeing above average gains too.

Even as rural Oregon faces challenges — see our report — job growth in recent years is probably the most encouraging sign. This is particularly true in a relative sense compared to the rest of rural America. It took even longer for growth to return to many rural communities, however all regions of the state are now adding jobs. In fact, rural Oregon is adding jobs at a roughly 2% pace for nearly two years now. That growth, as we pointed out at our forecast release, is faster than the U.S. average overall. Now, most rural counties have yet to fully regain all of their lost jobs. As of the recently revised and released data, the typical rural county in Oregon today has recovered a bit more than 70% of their recessionary lost jobs. That said they are making progress and seeing stronger growth than the majority of their national counterparts. While the longer-run trends have been lackluster, the short-term trends are very good news.

Data Note: this last graph shows CES employment data, whereas all of the previous was QCEW. For rural Oregon, CES employment pegs it at -2% below pre-Great Recession levels while QCEW pegs it at -1%. Given they come from different data sources, the underlying data do differ but are telling the same general story.

Posted by: Josh Lehner | March 9, 2017

Metro Size and Employment, 2016

Back by popular demand, here is an update on job growth across the country based on metro size. BLS just released the 2016q3 QCEW data on Tuesday for the entire country. This is the detailed data of employment and wages based on unemployment insurance records. It comes with a time lag — again the q3 data was just released — but is much more accurate in nature.

Since our last look 18 months ago the relative patterns of job growth have not changed considerably. What that does mean, however, is that the nation’s largest metropolitan areas continue to outperform the rest of the country and the cumulative gap is getting bigger. Here in Oregon the trends are a bit different and we’ll talk about those tomorrow.

Our first chart shows employment changes since the start of the Great Recession. As the line plummets that represents employment losses during the recession. As the line works its way back up that’s the recovery taking hold and regional economies are adding back all the lost jobs. Once the line reaches 0% again, then all of the lost jobs have been recovered and anything above 0% represents job growth above and beyond levels seen prior to the Great Recession. Two minor notes. First, medium sized metros now appear to be pulling ahead of the small metros in the past year or two, something that wasn’t necessarily true earlier in the recovery and expansion. Second, rural areas have stalled out and continue to see diverging patterns between the oil patch counties and the rest of rural America.

The second graph shows year-over-year job growth since 1980 for the same classifications. What’s interesting here are the differing patterns over time. In much of the 1980s and again during the housing boom, growth rates were similar across these metro sizes and rural areas. However the 1990 recession impacted large metros severely (SoCal in particular), and the technology-led expansion in the late 1990s resulted in very strong growth in the nation’s largest metros. In recent years, the same general pattern as the late 1990s has reappeared. All areas of the country are adding jobs, but the largest metropolitan areas are adding jobs at a faster pace.

As mentioned above, the rural stall is all about the oil producing regions of the country, or at least the rural counties in oil states even as not each county is necessarily a major oil producer. Following the oil crash in late 2014, jobs disappeared and haven’t come back yet overall. The rest of rural America is seeing job growth, although it has slowed from around 1% to around 0.5% over the past year and a half.

For another really interesting look at this data broken down by urban, suburban and rural areas, head over to the recent post by Jed Kolko, Indeed’s chief economist, formerly of Trulia.

Tomorrow we’ll take a look a these trends here in Oregon. We’re similar in some respects but not entirely the same as these national patterns, which overall is a good thing.


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